A change order is a written amendment to a construction contract, agreed by the owner and the contractor, that changes the scope of work, the contract price, the contract time, or any combination of the three after the contract has been signed.
In the UK this is called a variation. Same idea, different word: any change to the agreed scope after the price is fixed.
Change orders exist because no set of drawings survives contact with a real building. The owner adds two offices. The architect swaps a finish. An inspector asks for something the plans didn't show. Each of those changes costs money or time, and the change order is how the contractor gets paid for it instead of absorbing it.
How does a change order work?
The sequence differs between contracts, but on most commercial jobs it runs roughly like this:
- The change is identified. It might come from the owner, the architect (often as an architect's supplemental instruction or a request for proposal), a field condition, or an RFI answer that turns out to add scope.
- The contractor prices it. This is the change order request or proposal: the added (or deducted) cost of labor, material, subcontractors and equipment, plus the markup the contract allows for overhead and profit, plus any effect on the schedule.
- The parties negotiate. The owner's side checks quantities, rates and markup. Scope gets clarified. Sometimes the price moves.
- The change order is signed. Once the owner (and usually the architect) signs, the contract sum and contract time are formally adjusted.
- The change order goes on the schedule of values. Approved change orders get their own lines on the pay application, so the work can be billed as it is completed. (More on that in what is a pay application.)
The commercial rule is the same in every market: the work changes when the paper changes. Work done on a verbal "go ahead" before anything is signed is the most common way contractors give money away.
What should a change order include?
A good change order is specific enough that nobody can argue about it six months later. At minimum:
- A reference number and date, and the project it belongs to.
- A clear description of the change, tied to the drawing, spec section, RFI or instruction that caused it.
- The cost breakdown: labor, material, subcontract and equipment, with markup shown the way the contract requires.
- The adjustment to the contract sum: original contract sum, net change from prior change orders, this change, and the new contract sum.
- The adjustment to the contract time, even if it is zero days. Leaving time silent invites a delay argument later.
- Signatures from the people the contract says can authorize changes.
Change order vs. change directive
A construction change directive (CCD) is what happens when the owner needs the work done now but the price or time hasn't been agreed. Under standard forms such as the AIA A201 general conditions, the owner and architect can direct the change, the contractor proceeds, and the cost is settled later, often by the contractor keeping detailed records of actual cost plus an allowed markup. Once the price is agreed, the directive is usually converted into a regular change order.
The practical difference: a change order is agreed scope and agreed money. A change directive is agreed scope with money still open. That open number is a risk, so the record-keeping on directive work has to be tighter than on anything else on the job. Exact procedures depend on your contract, so check the general conditions you actually signed.
How to price a change order (illustrative example)
Say an owner on a tenant improvement job asks for two extra private offices in an open-plan area. The numbers below are illustrative only, to show the shape of the calculation.
| Item | Cost |
|---|---|
| Framing and drywall subcontractor | $18,400 |
| Electrical subcontractor | $6,200 |
| GC labor and supervision | $2,100 |
| Subtotal | $26,700 |
| Overhead and profit at 12% | $3,204 |
| Change order amount | $29,904 |
The contractor would also state a time impact (say, five working days if the offices sit on the critical path) and attach the subcontractor quotes behind the first two lines. The markup percentage is whatever the contract allows; many contracts cap markup on subcontracted work differently from self-performed work.
Notice the subcontractor lines. The GC's change order to the owner usually triggers change orders down to the subcontractors too. If the GC agrees $18,400 with the framing sub but forgets to issue the sub a written change to their subcontract, the two sides of the job no longer match, and the gap shows up at closeout.
Why change orders cost contractors money
Nobody loses money on change orders through ignorance. Every superintendent knows a change happened. The money goes missing in four predictable places:
- Work done before the paper. The field team does the work on a nod, and the change order is written up weeks later, if ever. The longer the gap, the weaker the claim.
- Underpriced changes. The change is priced in a hurry, from memory, without the rates the original bid used. Overhead and schedule effects get left out.
- Pending changes that never get chased. A change order request sits unsigned, the work is done, and it drifts into the closeout negotiation where it gets traded away.
- Changes that don't reach the cost side. The owner change is approved, but the matching subcontract change isn't issued, or the budget isn't updated, so the job cost report says the job is losing money when it isn't (or the reverse).
The fix is making the capture faster than the loss. If raising a properly priced change takes a minute, it happens on the day. If it takes an evening with a spreadsheet, it waits, and waiting is how changes become free work. For the field-level version of this story, read the change you did the work for but forgot to charge for.
Owner changes, internal changes and subcontractor changes
It helps to separate three kinds of change, because each one moves different numbers:
- Owner (client) changes move the contract value. They are revenue, and they belong on the pay application once approved.
- Internal changes are cost or scope changes the owner isn't paying for, such as rework or a buyout that came in over budget. They move your cost and your margin, not the contract value.
- Subcontractor changes adjust what you owe a subcontractor under their subcontract. They may or may not be backed by an owner change.
Mixing these up is how a project manager ends up reporting a healthy job that is quietly eroding, or chasing an owner for a cost that was always yours.
How Vyntworks handles change orders
Vyntworks is built around UK terminology, so in the product these are called variations, but the workflow covers all three kinds above. On the procurement side, client, internal and subcontractor variations are each handled differently: a client variation carries a pending, approved or rejected position and only counts on the client report once confirmed; an internal variation is created pending and goes to the right authorizer as an Approve / Decline email, counting toward the project's revised figures only once approved; and a subcontractor variation is tied to a supplier and the subcontractor's order.
Once approved, variations land on the project's internal valuation as their own rows, tagged by type, so the earned figure your cost control reconciles against includes the changes, not just the original estimate. (Live CVR and WIP reporting are part of the Vyntworks Intelligence add-on; see pricing.) Related reading: what is job costing.
If change orders on your jobs still live in email threads and a spreadsheet nobody trusts, book a walkthrough and we'll show you the change control flow on a project shaped like yours.
